Taxes - College in NY, Worked in Maryland - how to do state taxes?

[dundee]

Friends, I always find a wealth of information on this forum. Thank you for all you do to help each other!

My son goes to college in NY. In 2020, he spent 8 months working in Maryland as a Coop. He did not have any job (not even campus job) while living in NY. I am trying to do his taxes. I use FreeTaxUSA. He was on my insurance, did not have any 1099DIV or 1099INT. He did have tuition fee, so, did get 1098T from college.

The questions I have are as follows:

1. My wife and I each contributed 5k each to his 529 last year. He contributed additional 5k from his income to his 529k. Can my wife and I both claim 5k deduction in our NYS taxes? Additionally, can he also claim 5k deduction in his NYS taxes?

2. From his W2, some state tax was paid to MD (2,600). And a very small tax was paid to NY (200). I assume he has to file taxes in both states? when I do the tax work with FreeTaxUSA, based on his SS wages of $40k, it calculates MD taxes of $2604 and NYS taxes of $1600. Does this sound right? Does he have to pay taxes to both states? It seems like double taxation.

I would really appreciate if the tax experts on this forum can help with some guidance! thank you again.

[startbyservingothers]

Every case is unique, but with 2 states it typically works like this:   Both states charge income tax.  The state you live in gives a credit in the amount of the tax paid to the other state.  Your total is around the amount you would pay with only the most expensive state.




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Long time MMM follower and tax preparer.   I do tax returns nationwide using our secure system.  Accepting new clients through Mar 5.

[AccrualWorld]

It is unlikely he is a resident of NY just because he goes to college there. Are you a resident of NY or MD?

I'm guessing since he worked in MD for 8 months, he's likely a MD resident, and all of his income is in MD, he shouldn't have any NY taxes due. Are you checking off that he's a full time resident of NY in the tax software? This could be causing the issue.

[SimpleCycle]

I’m guessing you don’t want to him to claim residency in MD because that would be abandoning his NY domicile for in-state tuition purposes?

NYS will definitely consider your son domiciled in NY and therefore he needs to do a resident tax return in New York.  But it also looks like MD considers your son a resident for tax purposes as well because he meets the 183 day rule.  It looks like this situation is possible according to the third link.  I’d consult a CPA in your state.

https://www.tax.ny.gov/pit/file/pit_definitions.htm

https://www.marylandtaxes.gov/individual/income/filing/index.php

https://www.blog.rapidtax.com/can-resident-two-states-time/